In Victoria, when you buy or sell a property, you will need a legal contract known as the Contract of Sale. This contract depicts the particulars of sale and ensures that both parties are clear about their obligations. It is usually prepared by a legal practitioner or conveyancer and both the purchaser (buyer) and vendor (seller) must sign. Often, instead of drawing up a new contract, real estate agents, legal practitioners and conveyancers will use a standard contract. This could be the Contract of Sale of Land from the Law Institute of Victoria (LIV) or from By Lawyers.
Typically, a Contract of Sale includes the following:
- The names of each party (vendor and purchaser, real estate agent, legal practitioner(s) or conveyancer(s))
- The address
- The deposit and sale price
- The settlement date
- Information relating to the certificate of title
- Whether the property is to be sold with vacant possession or subject to a lease
- General and special conditions
There are a number of general conditions in a contract that outline the rights and responsibilities of the vendor and purchaser, as well as some additional clauses known as special conditions. These include general conditions covering GST, builder warranty insurance, general law land, default notices, how the purchaser will pay the deposit, security interest, settlement and much more.
Today, however, we’ll be focusing on just one: General Condition 28. This condition outlines whether the vendor or purchaser is liable for any notices issued on the property. When you own property, you don’t live in isolation; parties such as local councils, owners corporations and other authoritative bodies have certain regulations you must comply with.
If your property isn’t up to scratch, chances are you will hear from these parties in the form of official notices, orders, demands or levies. But when you’re in the process of transitioning ownership from one party to another, who’s obliged to act —and, most importantly, pay?
We’ve broken down General Condition 28 to help you better understand your rights as a vendor or purchaser and the particulars of what you must do in this situation.
First of all, what is General Condition 28?
General Condition 28 in the LIV Contract of Sale of Land covers the subject of notices; that is, who is obliged to take responsibility for any property liabilities during the sale period. Depending on what stage of the process parties are at, the contract deems whether the vendor or the purchaser must take action.
The condition reads as follows:
28.1 The vendor is responsible for any notice, order, demand or levy imposing liability on the property that is issued or made before the day of sale, and does not relate to periodic outgoings.
28.2 The purchaser is responsible for any notice, order, demand or levy imposing liability on the property that is issued or made on or after the day of sale, and does not relate to periodic outgoings.
28.3 The purchaser may enter the property to comply with that responsibility where action is required before settlement.
In other words, the vendor is liable for any one-off notices that require immediate action prior to the sale of the property. After the contract has been entered and the property has been sold, this responsibility is given to the purchaser, even before settlement. This means that the purchaser can be given access to the property prior to settlement, allowing them to fulfil any legal obligations; however, this is only in cases where notices must be addressed before the date of settlement.
If notices have not been addressed by the vendor at the time the contract is devised, it is within the right of the purchaser to refuse settlement until the issue has been handled or appropriate arrangements have been made to satisfy the conditions.
This condition was known as General Condition 21 under the previous version of the LIV standard Contract of Sale and is currently General Condition 21 in the By Lawyers contract. Despite the different numbers, the two general conditions are virtually the same and clearly outline your legal obligations: the vendor must oversee notices before the sale and the purchaser must oversee notices after.
What is considered under General Condition 28?
Typically, this condition applies to notices for any action that carries legal consequences for not following through by a certain date. That is, notices normally concern issues where you are in violation of the law, council or owners corporation rules, or the regulations laid out by another official body. You are only obliged to cooperate if there are legal ramifications for not doing so.
Notices cannot be verbal; as By Lawyers states, a notice must be in writing and place an “immediate legal obligation on the recipient” (either the vendor or the purchaser, depending on the time the notice is issued). As such, the recipient must act before the date given or they will be liable for any consequences.
Some notices that are covered by General Condition 28 include:
- Demolition orders
- Plumbing works
- Fencing requirements under the Fencing Act
- The removal of hazards such as noxious weeds or fire hazards
- Breaches of planning permissions
Notices may also include fees that need to be paid; however, as stated in the contract, this excludes any regular payment (see below).
What isn’t considered under General Condition 28?
As stated in both 28.1 and 28.2, periodic outgoings are not applicable. Examples of this include monthly, quarterly or annual payments.
That being said, the purchaser’s right to be informed about any existing regular costs is detailed in Section 32 of the Sale of Land Act, which states that the purchaser must be informed of the ‘particulars of any notice, order, declaration, report or recommendation of a public authority or government department or approved proposal directly and currently affecting the land…which the vendor might reasonably be expected to have knowledge’.
Such information is typically outlined in the vendor’s statement (also known as a Section 32). This allows the purchaser to anticipate any regular payment they may be required to make if they choose to go through with the sale.
If a vendor’s statement is not provided or information is false — such as omitting any notices, orders, demands or levies — the purchaser may claim their right to end the contract.
It is important to note that ending the contract is subject to a few factors, such as whether the error is attributed to the vendor’s representative rather than themselves or whether the purchaser can prove they would not have paid for the land or property if they were aware of the missing information. The particulars of this can be quite complex, so it is always best to get legal guidance when it comes to contract disputes.
Special levies for owners corporations
If the land or property is affected by an owners corporation — that is, it includes common areas such as driveways, lobbies, basements, stairs/lifts, gardens or other services — there are extra considerations you will need to take into account when it comes to the purchase.
For one, the statement made by the vendor must report any regular fees such as administrative fund levies (regular/daily maintenance, electricity for main areas, insurance) and sinking fund/capital works fund levies (to cover larger purchase items for future maintenance/repairs). It is important to note that owners corporations issue levies to lots, not to individuals. If you are the purchaser, you will need to double-check that all outstanding levies have been paid before agreeing to the contract and making your payment.
The resolutions made at the last annual general meeting should also be supplied by the vendor, as these may provide insight into the condition of the property and whether there are any upcoming projects that may require special levies.
Special levies are used when there is not enough money in either the administrative fund or the capital works fund to pay for essential costs. This can be either due to a project going over budget or unforeseen circumstances, such as damage to the building.
In terms of who is responsible for the payment, the Property Law Dispute Resolution Panel has been consistent in insisting that legal liability only applies once the formal levy has been imposed. Thus, the general conditions of the contract require the vendor to pay for any special levies issued prior to the contract date. However, if the special levy has not yet been imposed by the time the contract is signed, the purchaser will inherit the cost.
That being said, this only applies to levies charged as a lump sum. Some special levies may be charged as smaller payments over a period. As these are ongoing payments under General Condition 28, purchasers will not be obliged to pay these fees. This is where things can get complicated, and why it is so important to have the right legal advice.
Before entering a contract, it is important for purchasers to enquire whether there are any planned changes or anticipated work that will require special levies. It is also a good idea to evaluate the Sinking Fund and whether it is sufficient enough for emergency repairs and long-term maintenance. In certain cases, the purchaser may be able to negotiate a lower price to offset the cost of the levy.
Before signing off on any contracts, you should ensure that you understand your legal rights and responsibilities. Having an expert legal practitioner or conveyancer who can explain the Contract of Sale and guarantee that your best interests are represented is crucial. Get in touch with our team today to find out more about general conditions and what they mean for you.
This update does not constitute legal advice and should not be relied upon as such. It is intended only to provide a summary and general overview on matters of interest and it is not intended to be comprehensive. You should seek legal or other professional advice before acting or relying on any of the content.
Last updated: 15 June 2021 Article by: Halil Gokler Edited by: Randa Balbissi
